Supervalu to sell eight U.S. distribution centers after activist pressure

(Reuters) - U.S. supermarket operator Supervalu Inc SVU.N said on Tuesday it would sell eight of its distribution centers to an undisclosed buyer for about $483 million following pressure from activist shareholders, sending its shares up 3.5 percent.

The company said after it closes the sale, it will enter into lease agreements for each of the facilities for an initial term of 20 years with renewal options.

Earlier this month Reuters reported, citing a source, that the company was exploring a potential sale encouraged by activist shareholders, including Blackwells Capital LLC.

Blackwells called on the company in October to “unlock the value” of its owned real estate, whose value it said exceeds Supervalu’s market cap, and also consider selling about 30 percent of the 217 stores it owns.

“I don’t know how satisfied they are going to be,” Pivotal Research Group analyst Ajay Jain said of the activist shareholders, “But I think the company’s clearly made a lot of progress on divestitures and on sale and leaseback transactions.”

Separately, Supervalu posted higher fourth-quarter profit and revenue as it benefited from investments in its wholesale business.

Net income from continuing operations rose to $25 million, or 65 cents per share, in the quarter ended Feb. 24, from $24 million, or 65 cents per share, a year earlier.

Revenue rose 42 percent to $3.59 billion.

Competition among U.S. grocery retailers has tightened, particularly since Amazon.com Inc’s (AMZN.O) $13.7 billion Whole Foods purchase in August 2017. Supervalu has invested heavily on its e-commerce strategy, including home delivery and picking up in stores products bought online.

But Chief Executive Officer Mark Gross said the company is fit to compete.

“As food becomes more and more fragmented and there are more and more places that are selling food... they might not necessarily have the distribution network to fully embrace all food, particularly in the cold chain,” said Gross.

“We’re very comfortable.”

Shares of the Eden Prairie, Minnesota-based company rose about 3.5 percent to $15.12 in extended trading.

The company also said on Tuesday that it was pursuing the sale of its grocery store chain Shop ‘n Save in St. Louis and the chain’s retail operations along the East Coast. In March, Supervalu said it would sell 21 of its 38 Farm Fresh Food and Pharmacy stores for about $43 million in a bid to steer its resources away from the retail business and remake itself as a distributor.

Excluding certain items, the company earned 61 cents per share, missing the average analysts’ estimate of 79 cents, according to Thomson Reuters I/B/E/S.

The company also forecast net sales for fiscal 2019 to be $15.5 billion to $15.7 billion. Analysts on an average are expecting revenue of $17.16 billion.

Reporting by Melissa Fares in New York and Aishwarya Venugopal in Bengaluru; editing by Arun Koyyur and Lisa Shumaker